credit cards

Here’s what you need to know on how to use a credit card

The credit card market is slowly gaining pace in India even though the number of holders is far less than that of debit cards. Now, several e-commerce companies are all set to launch their credit cards in association with a financial institution.

Some of the credit card companies are also offering cards with physical buttons on them. You have to select a relevant one with features similar to those you seek to avail.

However, you need to know how to use a credit card before you move on to such sophisticated products. Learning all aspects and factors surrounding a credit card is essential to avoid high interest rates and lower credit score.

Here are a few points to remember when using a credit card:

  1. Credit cards are usually of two types

Financial institutions provide two types of credit cards:

  • Secured credit cards (Sanctioned against a fixed deposit).
  • Unsecured credit cards.

Secured credit cards are best to improve your credit score. A high credit score is essential to apply for premium credit cards.

  • Credit cards come with a credit limit

Your card’s credit limit is the maximum amount of financing that you can utilise via your credit card. Some companies allow you to spend more than the credit limit against an over-the-limit fee.

Also, spending above your credit limit lowers your credit score. It is recommended to keep your credit utilisation under 30-50% of the limit.

  • You have to pay the bill within the grace period

The next point in how to use a credit card is to properly utilise the grace period. It is the maximum time you get to pay the outstanding dues without attracting interest on it. The grace period can range up to 45 days including the one-month bill period along with the time you get to pay it.

To elaborate, the billing period stretches for one month. You get another 15 days to pay this after it is generated. This total time is known as the grace period. You also don’t incur any interest during this period and hence, it is also called as the interest-free period.

Failure to pay your bill within the grace period not only attracts interest but also lowers your credit score.

  • Your credit card statement comes with two amounts

A typical credit card bill has the following two amounts:

  1. Total payable amount – The full amount that you currently owe.
  2. Minimum payable amount – A percentage of the total amount, which may additionally include an interest part.

Paying the minimum amount due is beneficial when you don’t have enough cash to clear the full amount due. However, doing so will reduce your credit score. Also, the majority portion of the total payable amount is carried forward to your next month’s statement.

  • Credit cards provide reward points with every transaction

Reward points make credit cards more beneficial for transactions than debit cards. You have to know how to use a credit card correctly to get the most out of them.

Credit cards provide high reward points on specific purchases. Hence, choosing the right product is essential to avail the most benefits.

For example, opt for a travel credit card if you are a frequent flyer. You earn travel miles with these credit cards redeemable to avail discounts on future air ticket purchases. These cards also provide additional benefits like concierge services, complimentary airport lounge access, etc.

The Bajaj Finserv RBL Bank SuperCard is an exceptional credit card providing up to 8 complimentary accesses to airport lounges every year.

Bajaj Finserv also provides pre-approved offers on credit cards that help you save time when availing them. Pre-approved offers are also available on home loans, business loans, personal loans, and a list of other financial products and services. You can check your pre-approved offer by providing only your name and phone number.   

Keeping these points in mind will help you to learn how to use a credit card. Also, make sure to check the various charges before you apply for one.

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